Education loans look attractive at the very first glance with no or very little drawbacks. But things are not as easy as you might have thought. An education loan can pay off well as long as you do borrow it wisely. Here are some things that every student should consider before applying for an education loan in Nepal.
1. Cost of the loan:
The cost of Educational/Student loans depends upon the interest rate, loan processing fees, subsidies, grace period, term period, and moratorium period. You should read carefully and understand each term and condition (not only just interest rate) before opting for an education loan. Students are recommended to compare the cost of education loans among banking institutions.
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2. Amount of money:
Remember loans are not free money as you have to pay for it sooner or later. No matter how much the interest rate is subsidized you should only borrow the money that you need. Every penny you borrow from banks will cost you more than the principal amount at the time of repay. If you borrow more money than you actually can repay then you are more likely to suffer from financial crisis after the completion of the study.
Tip: You can also find the amount of money that you need by calculating the college's fees, living cost, family income, savings, etc.
3. Cosigner:
A cosigner is somebody who applies for a loan with you and agrees to pay off the debt if you are not able to make payments. Usually, the cosigner is one of your parents. A creditworthy cosigner is a must to get education loans from banks. The banks provide loans on the credit of the cosigner, not the student. Remember that cosigning is a responsible commitment. In case the student stops making loan re-payments, the cosigner must take over and make the necessary payments.
4. Collateral/Security:
Generally the educational loan is granted by Banking institutions against fixed assets collateral and fixed deposits. Generally you need a collateral that covers the value of the loan to certain extent. The collateral/security can be land, building, securities & bonds, gold, and fixed deposits.
5. Scholarships/Grant:
Before processing for loans, students must check whether any form of scholarship is available for them or not. Merit-based, need-based, as well as extracurricular scholarships, are available for students. You can also find full details about various scholarships that are available to Nepali students in the Scholarship section of edusanjal. Click here to find about the scholarships.
6. Eligibility:
Generally, education loans are provided for professional and higher studies to the students. Eligibility for education loan in Nepal depends upon the annual income, level, and type of course study, academics, potential future earnings, and collateral. Only Nepali nationals are eligible for education loans in Nepal.
7. Tenure of the loan:
Different banks have different tenures for the loan such as 10, 12, or 15 years. Similarly, the grace period and moratorium also vary for these loans as well. While a short tenure will save some money as there will be less time for the payment of interest.
8. Consider for a Part-Time Job:
As living costs, as well as educational costs, might be high in some Nepali Colleges, students can also seek for a part-time job to cover their expenses rather than fully relying on educational loans.
10. Know the rules and follow instruction:
Make sure that you know all the rules and regulations before applying for financial loans. If you are confused about any terms and conditions don't hesitate to ask the loan officer. Make sure you know the details like the total loan cost, monthly payments, fees, whether the interest rate is fixed or may vary as per the market.
